The Indian Paper Makers' Association (IPMA) submitted a pre-budget memorandum to finance minister Yashwant Sinha last week claiming that the sharp reduction in import duties on paper was unwarranted.

"The sharp decline in import duty from 65 per cent in 1994 to 20 per cent in 1995 has led to large-scale imports with little or no offtake from the domestic mills for the last three years," the association said.

It claimed that as against the World Trade Organisation (WTO) recommended duty of 92.5 per cent in March 1997, the duty in India on paper was only 25 per cent while even by the WTO standards, India had to peg duties to 40 per cent by 2000.

"Reduction in import duty has exposed domestic industry to international competition without an adequate adjustment period," the IPMA said.

The governmentalso did not consider the higher costs of infrastructure as well as high input costs that domestic paper industry has to face, the memorandum said adding that only if these were brought on par could India compete with European Union and the United States.

Currency depreciation in South East Asian countries has aggravated the present crisis with the Indian industry losing its export competitiveness also, IPMA said.

"This has affected the viability of the industry which is now operating at 66 per cent of its capacity forcing several mills to either close down or curtail production," it said.

In the case of newsprint too, reduction of import duty to 10 per cent has resulted in higher import of 4.26 lakh tonnes in 1997-98 as against a demand for seven lakh tonnes which the domestic industry can easily meet from its existing capacity.

"Dumping by global manufacturers is still continuing as the anti-dumping duty on newsprint imports, as recommended by the commerce ministry, has not yet been imposed," italleged.

Seeking a hike in import duty to 25 per cent, it said the notification allowing newsprint import with more than eight per cent ash content at zero duty must be cancelled to prevent clandestine imports.

"At present, increasing amount of imported newsprint is diverted for printing lottery tickets, magazines and telephone directories," the association said.

For curtailing cheap imports from the South East Asian countries, the association recommended levying an emergency duty of 50 per cent of landed costs on wood-free printing paper, if imported at less than 650 dollars per tonne.

IPMA also pointed out the anomaly in the duty structure for the paper industry with intermediates like starch, calcium carbonate and sodium sulphate attracting import duty of 30 per cent as against a duty of 25 per cent on paper.

It suggested a duty of 12 per cent on these intermediates which works out to 60 per cent of the import duty on the end product.

This would conform to the policy of lowest duty on rawmaterials, higher on inputs and highest on finished products, the association said.

It has also asked for exemption on import-duty on pulp and waste paper and reducing the excise duty on paper and paperboards to stimulate demand.

To improve export competitiveness, IPMA sought adequate compensation for the high interest rates, poor infrastructure and non-reimbursable tax levied by various states. "Export credit is presently at 13 per cent. This should be made available at the international rate of seven-eight per cent," the IPMA said.